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Trump will fail in his plan to reignite coal

Reviving the US coal industry was one of the tenets of Donald Trump’s election campaign, but cheap shale gas makes this a very difficult proposition. It is unlikely he can fulfil this promise.

byGarry White

in Features

10.12.2018

Arnold Schwarzenegger wants to travel back in time like the character he played in The Terminator so he can stop fossil fuels from ever being used. One of Donald Trump’s key pre-election pledges was to increase US coal use to boost the prospect of miners in the Appalachian Mountains who had been side-lined by “phoney” climate-change evangelists. Both of these suggestions are impossible dreams.

Mr Schwarzenegger was speaking at the opening of the United Nations latest climate change conference, known as the Twenty-Fourth Conference of the Parties – or COP24. It is currently taking place in Katowice, a town right in the heart of Poland’s coal-mining region. When it comes to coal, the hosts Poland and the Trump administration are on the same page. Poland has substantially larger reserves than any European country and generates more than half of its electricity from coal. The Polish presidency wants to ensure a “solidarity and just transition” for industrial regions including creating “favourable conditions for the construction of a profitable, effective and modern hard coal mining sector.” There are even some coal miners sponsoring the climate conference.

The aim of COP24 is to finalise the rules on how countries will implement the Paris Agreement on climate change from 2015, which aims to keep global temperature rises below 2% from 1990 levels. It is trying to put governments’ promises on actions to reduce greenhouse gasses into verifiable actions. The US has still sent representatives to the conference, despite President Trump announcing that the US would cease all participation in the Paris Agreement in June last year. Legally, the US is still a party to the agreement until 2020. The message of the Trump administration will be that poverty can be reduced by access to cheap energy from fossil fuels – a message that is likely to go down very well with the conference’s hosts.

Coal really matters for Donald Trump. Coal miners played a central part in his re-election campaign – arguing that Barack Obama’s focus on climate change and increasing regulation was just another way the liberal coastal elites were damaging the prosperity of ordinary Americans. He received a lot of financial backing from industry players and said he would end the “war on coal” started by his predecessor. To achieve this he has been rolling back environmental legislation in an attempt to allow the industry to flourish.

There is only one main problem with Trump’s aim. The fracking industry means the US now has an abundance of cheap gas to generate electricity so such a move does not make economic sense. Indeed, data from the US Energy Information Administration released last week showed that consumption of coal in the country in 2018 is likely to be the lowest since 1979. The government body said it expects total US coal consumption will fall 4% this year and by a further 8% in 2019. American coal use has been steadily falling since 2007 as the price of gas has become more competitive and due to the extra efficiencies involved in producing electricity from gas over coal. Despite the president’s wish to boost the coal industry for political gain – market forces are more powerful. “The coal industry is back,” President Trump declared at one rally in West Virginia last summer. Last week’s data suggests that he is wrong.

Some in his administration appear to understand this. US Secretary of Energy Rick Perry spoke last week at the 128th Meeting of the National Petroleum Council, an industry body. A significant part of this speech related to the development of natural gas and petrochemical industries in Appalachian coal country. “This is economic opportunity for a region that needs it”, Mr Perry said. This seems like a more sensible route to prosperity.

Globally, coal is likely to remain a significant part of the energy mix. Coal consumption grew by 1% globally in 2017, its first increase since 2013, according to data from BP. Growth was driven largely by India, with Chinese consumption also up slightly following three successive annual declines. OECD demand fell for the fourth year in a row.

The situation in the US is unique because of its recent shale energy revolution. The costs of different types of energy vary depending on a country’s natural resources – with the phasing out of nuclear power station in countries such as Germany and Japan following the Fukushima nuclear disaster in Japan in 2011 increasing demand for coal-powered generation. This means that finalising the details of the Paris Agreement at COP24 will be a challenge. Paris set out a plan and Katowice should mark the start of countries putting into place real actions. However, major fossil fuel producers such as Australia, Saudi Arabia and the host Poland are likely to want to temper any action. Oh and, of course, any agreement will be non-binding anyway.

The US is also unimpressed that China will be treated as a developing nation – so will be subject to less stringent rules that major nations in the West. This means the result of the talks may prove disappointing for some. But, whatever happens, the economics of coal in the US means Donald Trump’s plans to revive an industry that supported his elevation into the most powerful office in the world are likely to fail. This should please supporters of action to prevent climate change – but leave a substantial part of his base very unimpressed.

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